Is a Long-term Consultant Without a Formal Agreement Entitled to Gratuity?

To the committee members,

In our company, we have a full-time consultant who has completed 9 years of service with us. However, he now wishes to discontinue his consultancy services. We used to pay consultancy charges of Rs. 30,000 per month. He was not given any official designation, nor was any agreement made with him, as he is related to the owner. Could he be legally entitled to gratuity?

Regards, Jayant

Generally, consultants are engaged on a retainer basis, and the payment may be monthly, quarterly, half-yearly, or annually as agreed upon in the service contract. You would have to deduct TDS for such payments. In that case, he is not entitled to statutory gratuity in the event of termination of the contract.

On the contrary, had you employed him under a contract of service and the monthly payment is shown as salary, he would be an employee of the organization and entitled to gratuity despite his close family relationship with the owner of the organization.